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Investing: Channel your inner robot

In the 1951 sci-fi classic, The Day the Earth Stood Still, a guy parks his flying saucer near the Washington Monument. His mission: To save us from ourselves aka nuclear war. To make his point, he brought along an indestructible robot with a killer death ray.

The alien (a dead-ringer for British actor Michael Rennie) says that on his planet, robots act as cops because they are without emotion which gets people — from generals to stock market investors — into trouble.

Now that the stock market is booming, lots of federal investors who switched to the Treasury securities G Fund several years ago at the lowest (we hope) point of the recession are now itching to walk on what no longer seems like the wild side: That is, back to the C, S and I Funds which are at or near record high levels.

This is not, unfortunately the robot Gort from The Day the Earth Stood Still, which we couldn't use because of copyright concerns.(Image: Thinkstock)

Investing for retirement might be a lot easier if you were a robot, rather than a flesh-and-blood human-being. Especially one who watches the news a lot.

The federal Thrift Savings Plan now has a record number of participants, and is valued at $400 billion. Many have moved back and forth, from stocks to Treasury securities and now back again. They are reacting to what — if you are a long-haul investor — many consider as temporary ticks in the market. Timing the market, guessing when it has peaked or bottomed out, is tough. Vanguard's John Bogle, father of the index fund, once told Federal News Radio that he couldn't time the market and he never met anybody who could.

Last year, some feds were taking hardship withdrawals or loans from their TSP accounts. Furloughs then sequestration-driven shutdowns hurt a lot of people. The feds-helping-feds charity FEEA (the Federal Employees Education and Assistance fund) almost ran out of money providing low-cost loans.

Many federal investors were looking for safety last year. They moved into the never-has-a-bad day, low yield, G-fund. And stayed there while stocks in the C, S and I funds finally took off and headed upward.

Now that the stock market is roaring (at least for now), lots of investors are more willing to take financial risks they wouldn't have considered a year or two ago.

A suprisingly low number of TSP investors (about 16 percent) are in the so-called Lifecycle or L Funds. There is an L Fund for every age group and for people who either don't trust their financial emotions or prefer to let professionals handle their investments.

In the L Fund people pick a target date (2050, 2040, 2030, 2020) closest to the time they think they will start withdrawing money from their TSP account. That could be the day they retire, or it could be years afterward when they reach age 70 1/2 and must start taking IRS-mandated minimum withdrawals.

Last week, Federal News Radio reported that L Fund changes may be in the works. For more detail, click here.

The longer you have to invest (to ride out the ups and downs of the market) the higher the percentage of stocks — C, S and I Funds — in your portfolio. As time passes, the fund gets more conservative, via rebalancing. It also sells when stocks are high and buys when they are low, something many people find hard to do.

Some experts and individual investors believe the L Funds are too conservative. They would like see them revamped and/or to have new stock funds added to the list available to TSP participants.

So what would the potential changes look like? On yesterday's Your Turn radio program, financial planner Arthur Stein took a look at some of the proposals, as well as a possible new emerging markets fund and international small cap fund. Like many others, Stein is not a fan of the L-funds. He agrees that they are too cautious, especially the present income fund which is 74 percent invested in the G Fund. That doesn't take into account inflation, over the long haul, he says. To listen to the full program, click here.

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